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New apprentice levy funding model

On 12 Aug 2016, the Department of Education set out proposals for the new apprenticeship levy which will come into force in May 2017. This will require UK firms with a wage bill of over £3m per year to contribute 0.5% of annual pay (minus an allowance of £15,000) into the training fund.

Apprenticeships will be graded in 15 new bands with funding allocated in each from £1,500 to an upper limit of £27,000, depending on the type of training.

Construction Industry Training Board (CITB) director of policy Steve Radley said, “This announcement brings mixed news for construction. The co-investment rate for non-levy payers is lower than expected, at 10%, with the remaining 90% covered by funds raised by the levy. It’s also encouraging to see that smaller firms will be exempt from co-investment if they take on a 16-18 year old apprentice. With more than half of all construction apprentices under the age of 19, this is a win for the industry … But there is still work to do to make sure ensure funding bands reflect the actual costs of training, so that apprenticeships are affordable for companies of all sizes.”

Apprenticeships and skills minister Robert Halfon said, “The apprenticeship levy will help create millions of opportunities for individuals and employers. This will give our young people the chance they deserve in life and to build a highly-skilled future workforce that the UK needs.”

CBI director-general Carolyn Fairbairn said, “The Levy is too narrowly defined. It covers only one type of training and employers can only reclaim off-the-job costs. As a result, valuable forms of training risk being cut back, with quantity put ahead of quality. The May 2017 start date will not give firms sufficient time to prepare, so we urge the Government to delay implementation."